UK Regulator Sanctions two UK Audit Firms and two Former Partners

On October 12, 2023, the Financial Reporting Council (“FRC”) announced that it has imposed sanctions against KPMG LLP (UK), KPMG Audit Plc (UK), and two former audit partners following its investigations into the audits of Carillion plc (“Carillion”). In its first decision, the FRC sanctioned KPMG LLP and its former audit engagement partner who worked on the Carillion audits for 2014 through 2016 and a portion of 2017, finding multiple audit failings in numerous areas of the audits across the relevant years, including in many cases in areas which had been identified as presenting significant risk of misstatement. The FRC described many of the audit failures as “seriously deficient,” and further found that the engagement partner and KPMG failed in their duties to ensure that the audit engagement was properly managed and supervised. The FRC sanctioned KPMG LLP in the amount of £26,500,000 (reduced by 30% to £18,550,000 due to the firm’s cooperation) and the former partner in the amount of £500,000 (reduced by 30% to £350,000 to reflect his cooperation).

The FRC also issued a decision sanctioning KPMG Audit Plc and the former audit engagement partner for KPMG LLP for 2013 in connection with their failure to obtain sufficient and appropriate audit evidence that Carillion correctly classified certain IT and intellectual property transactions as being independent of one another. The FRC sanctioned KPMG Audit Plc in the amount of £3,500,000 (reduced by 30% to £2,450,000 due to the firm’s cooperation) and the former partner in the amount of £100,000 (reduced by 30% to £70,000 to reflect his cooperation).

The FRC’s announcement is available here.